Partnering with a hospital can benefit your ASC, but it can also carry a few drawbacks. Here are eight reasons why you might contemplate a joint venture and eight more outlining why you might reconsider those plans.

Advantages of partnership
1. Increased case volume. Plan on it: Your ASC's relationship with a hospital will increase its surgical volume. The primary reason for this is that your center will see more frequent traffic from hospital surgeons. They might previously have been hesitant to use your surgery center's ORs due to their direct competition with the community hospital and due to possible reactions from their hospital's administration. But they won't be chastised for taking cases to an ASC once it's the hospital's business partner. Your ASC may even be able to add service lines as hospital surgeons arrive, letting it host cases it wasn't able to offer before.

2. A significant investor. In general, physician-owners of an ASC have a fair amount of blood, sweat and cash committed to the enterprise. But they might not have an exit strategy, which becomes an increasingly important thing to have the closer they get to their planned retirement. For a successful ASC with a high valuation, it may be difficult to attract new shareholders, further complicating the exit strategy. Partnering with a hospital will let physician-owners unload part of their investments and get returns based on the fair market value at the time of the transaction.

3. A source of capital. As a surgical department of the hospital you partner with, your ASC may have access to capital for use in expanding or renovating its physical plant with the aim of increasing its capacity or efficiency, as well as for use in the purchase or upgrade of its equipment and technology. With the right numbers, you should be able to show the hospital how these expenditures can increase case volume.

4. Insurance incentives. Backed by a hospital partner, your ASC may gain the ability to enter into insurance contracts with third-party payors with whom it wasn't able to negotiate a deal on its own. The result? More patients, increased surgical volume and perhaps even higher reimbursements.

5. Access to staff. Compared to community hospitals, ASCs tend to operate with leaner staffs. This economic efficiency can lead to rescheduled or canceled cases, however, if absences or vacations leave the facility short-staffed. Partnering with a hospital can prove advantageous on the staffing front if your ASC can arrange for the planned and temporary "borrowing" of surgical personnel in order to fill gaps in the staffing schedule.

6. Supply savings. If your ASC isn't already in a group purchasing organization — or even if it is — hospital partnership can offer a fairly significant decrease in the cost of its supplies on account of the hospital's purchasing volume. In a pinch, the hospital might also serve as an additional, off-site supply room and may be able to courier over needed supply items or medications in the event of a shortage.

7. Fee-free accreditation. If a hospital acquires your ASC and brings it under the hospital's provider number, your surgery center would see cost savings in its accreditation process, since it would be inspected under the hospital's survey and wouldn't have to pay the relevant accreditation agency a separate fee for a separate survey.

8. Better benefits. If your staff becomes employees of the hospital you've partnered with, they'll be able to take advantage of the hospital's retirement plan and other benefits it offers. However, physician-owners will want to ensure that the hospital's benefit package, like its pay scale, is at least as good as what their employees have already been receiving.

The possible drawbacks
1. Loss of control. Most, if not all, of the potential negatives of hospital joint ventures lead back to this basic drawback: Your surgery center's daily operations will likely change. On a small scale, this may mean different ways of ordering supplies or purchasing equipment. In a larger sense, a hospital joint venture may threaten what makes an ASC an ASC. Physicians prefer ASCs for the quality of life that makes them work efficiently — although it might be noted that perhaps a failure to work efficiently is the reason why an ASC is considering a hospital partnership. After partnering with a hospital, physician-owners should maintain seats on the resulting board of directors in order to make sure their voices are heard and their concerns are dealt with going forward.

2. Distribution differences. On the profit-sharing side, physician-investors sell part of their ownership stakes to the hospital. They receive payment up front, of course, but the quarterly distributions they'll continue to receive as a return on their investment in the center may be smaller. (On the other hand, increased case volume and higher reimbursements may minimize this disadvantage.)

3. Scheduling conflicts. The increased traffic of hospital surgeons lured by your ASC's efficiency will boost its case volume. But it may also mean that the physicians who've been bringing their cases to your center all the while might not see as much OR time available, and they might not be able to retain their standing reservation for that choice 7 a.m. slot or weekly block.

4. Hospital responsibilities. One frequently cited reason why physicians start or join surgery centers is that they may be able to take less call at the hospital. It's a major quality-of-life issue. In some situations, though, and for some surgical specialties, physician-owners involved in a hospital joint venture might find themselves required to take more call again. That could be a major deterrent. As a result, physician-owners should determine up front what the hospital expects of its surgical department members.

5. Inconsistent staffing. While the hospital partner may be a useful staffing service for your ASC in a pinch, working with hospital personnel requires caution. It's not ideal for surgeons who work with a consistent OR team, who have come to rely on experienced nurses and techs who know their procedures, techniques and preferences. Finding fill-ins who are sufficiently experienced may be difficult, and new additions to a surgeon's regular team may affect efficiency even if they don't require time for training and explaining.

6. Standardized supplies. Administrators and physician-owners of ASCs choose which supplies, instruments and medications their facility purchases. Not every facility has standardized the items its surgeons routinely use for their procedures, a purchasing pattern which may weigh more on the bottom line, but which preserves individual choice. With a hospital partner involved in purchasing, that choice may be limited. The hospital may have standardized what it purchases and stocks in inventory, and you will likely have to take what it's buying if your center participates in the hospital's volume purchases.

7. Employment decisions. Similarly, you hold control over who you hire, how much you pay, when disciplinary measures are required and other employment issues. A hospital joint venture may take these decisions from your hands and place them, at least in part, into those of the hospital's human resources department. Of course, if you'd rather not be burdened with hiring and firing issues, this may be a positive aspect of a partnership.

8. Billing changes. From a customer service perspective, a transition from procedures billed independently by the ASC to procedures billed through the hospital's system may leave patients confused or unpleasantly surprised. This situation may have an especially negative impact if your surgery center didn't require as much of a co-pay as the hospital and its partners do, or if your center offered payment plans that the hospital doesn't.

Due diligence
In addition to obtaining a careful legal review and an independent value assessment, conducting research on the potential benefits and drawbacks is essential to forging a successful ASC-hospital joint venture. The best advice for physician-owners: Know who you're partnering with. Study the hospital and its administration, and even go so far as to call and visit the owners and administrators of its other joint venture facilities to observe their progress and find out how well it has honored its agreements.